Social democracy is the idea that the state needs to provide security and equality of opportunity for its people and should actively reorder society in a way that is conducive to such developments, but that such changes should be brought about gradually, legitimated by a democratically-elected majority. It is native to Europe, where social democrats regularly feature as one of the major parties and have led (or at least participated in) governments in most states at some point in time, most notably in Scandinavia (up to being nicknamed the "Nordic model", which is effectively a blend of social liberalism and social democracy). Social democrats typically regard government intervention as a force for good, constraining markets and engaging in redistributive efforts for the benefit of the lower classes and consumers in order to establish a more equitable society. The ideologies economic model is that of John Maynard Keynes.

Somewhat confusingly, social democracy is not the same thing as democratic socialism, nearly-identical names notwithstanding. Modern social democrats believe in maintaining the capitalist system — democratic socialists do not (liberal socialists are the only socialists that do).

Just like socialism, the term is heavily misused by both supporters and opponents. Social democracy addresses the issues that in less interventionist forms of capitalism, wealth inequality is passed on amongst generations due to inequality of opportunity. Sectarian social democrats sometimes opposes democratic socialism due to fear that such system would turn authoritarian, however this is questionable as democratic socialism does not propose "democratic" centralism as authoritarian socialists like Lenin do. It tends to meet in the middle, due to its allowance of multi-party democracy and not investing too much economic power in the state.

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While social democrats belong firmly in the progressive camp, they reject the need to change society by means of revolution and class warfare. Instead, they affirm the need of obtaining a mandate within the confines of existing democratic structures and, once in power, focus on implementing policies designed to bring about reform of a country's society and economy towards a more equal distribution of wealth. Since the end of World War II, European social democrats have generally abandoned the goal of building an alternative economic system to capitalism and moved towards platforms that affirm market-based economic orders and private entrepreneurship, yet still seek to implement welfare and state intervention designed to improve the long-term outlook for underprivileged groups.

The original split between traditional socialists and social democrats occurred at the end of the 19th century, when the latter emerged as a new branch of socialists who originally shared their vision of a radically different post-capitalist society, but didn't want to participate in outright revolutions that Marxist orthodoxy considered necessary to bring such change about. Instead, they opted to form political parties that acknowledged the existing order for the time being and tried to attain power through elections. Nowadays, this definition would cover all of the mainstream democratic left parties, even though many of these still label themselves "socialist". Therefore, this definition is inapplicable.

These days, many social democrats are largely indistinguishable from their conservative opponents, as a result of both types of parties converging around the center of the political spectrum. Key elements of the welfare state remain popular with the major parties as well as the general populace. Rich media magnates have used their control over large sections of news outlets to make policies that tax rich people less popular, also have used their lobbying power to lower the taxes their community pays. In recent years, overall spending on welfare policies has been slightly reduced by both center-right and center-left governments in a bid to decrease government deficits (without increasing taxes on rich people) and enhance economic competitiveness.

There is still some debate over how well these policies worked. Social democratic thought and governance has had a lot of influence on post-war Western Europe; the respective parties used to dominate the political landscape in Scandinavia and introduced the modern European welfare state model in numerous other countries such as France, Germany, and the Netherlands. While economic growth was robust up to the 1970s, the much more market liberal United States performed better in recent decades, though practically all of these gains in America went to the wealthy. Nowadays, only Norway, which has a great deal of oil, has a higher (PPP) GDP per capita than that of the USA. This discrepancy is mostly due to shorter working hours in European countries, while worker productivity (GDP per hour worked) in the US and in advanced European countries is at similar levels. Economic growth, employment numbers, and inflation tend to either be comparable to the US or greater depending on the economic climate, while the Northern European countries are ranked extremely high in terms of economic competitiveness. While average personal income in Western Europe is somewhat lower (especially after taxes, though in nominal terms the Nordic countries actually outstrip the US by a far bit), this is offset by more leisure time and typically higher provisions of public goods such as education and health care.[2] These free-at-the-point-of-use programs mean that, factoring them in, disposable income in Northern Europe can often exceed that of the US.

In social matters (for example, social mobility) however, the Scandinavian countries tend to outstrip the USA by a good margin. In terms of the Gini coefficient, which measures the equality of income distribution, the United States does very poorly (even worse than Russia) and is handily beaten by the European states. Human development and happiness are also indexes on which the Nordic counties perform considerably better.

In 2006, The Economist asserted that the Nordic Model, with what it deemed "grave defects", would break down, predicting that a new centre-right government in Sweden would dismantle the welfare state.[3] This would not occur. Two years later, the economies of both the United Kingdom (where The Economist is based) and its less-regulated counterpart, the United States, crumbled into the worst recession since the 1930s. Sweden's total tax rate remains at near 50%, and every Scandinavian nation (excluding deregulated Iceland) has emerged with comparatively lower debt levels and unemployment rates than both the US and UK. The Economist has since, if begrudgingly, called the Scandinavian nations "probably the best-governed in the world."

The stereotype that the Nordic model is a bureaucratic, Soviet-style mess borders on the willfully ignorant. In addition to exceptionally high union membership, there is a deep commitment to adapting with the times. To combat outsourcing and wage dumping as associated with globalization, Scandinavia is committed to free trade,[4] trading corporate taxes for VATs.[5] This regulatory environment is known as flexicurity, wherein ease of hiring and firing workers is offset with skills upkeep towards insuring that they won't go into poverty while unemployed.[6]

Social democracy in the United States has been associated with the left-wing of the Democratic Party and the right-wing of the Democratic Socialists of America. The latter organization had both social democratic and Marxist wings. The Democratic Party's left-wing, during the post-World War II era, was typified by organized labor and writers like Arthur Schlesinger Jr., who viewed social democracy as the "vital center" of politics in opposition to both far-left communism and far-right laissez-faire capitalism. Other groups, like the Social Democrats USA, and the related Democratic Socialist Organizing Committee, were formed by former Trotskyists who had swung hard-right on foreign policy and advocated a strong anti-Soviet Union stance, but remained economically leftist; this group's main ideological influence was Trotskyist theorist Max Shachtman, who is sometimes also cited as an intellectual father of neoconservatism. The 1912 election was particularly memorable as a (possible) high water mark of leftist ideology on the national stage, as it pitted an outright socialist (Eugene V. Debs) and a candidate of the Progressive Party (Teddy Roosevelt) as well as a self-described "progressive" for the Democrats (Woodrow Wilson) against an incumbent Republican (Howard Taft) who got clobbered and placed third.

A small Social Democratic Party[7] actually exists in the US, but most Americans have no idea. What they do know is the existence and resurgence of the Democratic Socialists of America (DSA), who recently helped candidates win local and state elections in Virginia towards the end of 2017.

For decades, the only self-described "Socialist" on the national political stage was Vermont Senator and 2016 Democratic presidential primary candidate Bernie Sanders. Although some parts of the internet had a near religious conviction that Bernie would eventually win the candidacy, this did not happen and Hillary Clinton won the candidacy, briefly throwing parts of the internet into mass hysteria. Still there are some who argue that if Bernie would have been the Democratic candidate the second great WTF? moment of 2016 would have been avoided.

As of the 2018 midterm election, due to the work of grassroots organizations such as the Justice Democrats, Democratic Socialists of America, and Bernie's Our Revolution, a few new social democratic figures have cropped up in the American mainstream. Possibly the most well-known of the entire group is Rep. Alexandria Ocasio-Cortez (NY-14), who initially gained fame for successfully primarying House Democratic Caucus Chair Joe Crowley from the left. Also included in this group are newcomer and incumbent House Democrats such as Ro Khanna (CA-17), Pramila Jayapal (WA-7), Ilhan Omar (MN-5), Ayanna Pressley (MA-7), and Rashida Tlaib (MI-13).